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However, in Chapter 13, debts arising under § 523(a)(15) are dischargeable if the debtor receives a
full-compliance discharge. In re McCreary, 2009 WL 5215587 (Bankr. C.D. Ill. 2009). Thus, if the
obligation is not a support obligation but arises from a divorce or separation agreement or order,
the debtor is only required to pay a required pro rata share of the funds available in the Chapter 13
plan. The creditor spouse is treated as a general unsecured creditor and, upon successful completion of
the plan, any remaining balance is discharged. In re Rabideau, 2011 WL 165179 (Bankr. C.D. Ill. 2011).

Thus, the distinction between support and other obligations is significant in Chapter 13 cases.
“Whether a debt is nondischargeable as being in the nature of alimony, maintenance or support . . . is a
matter of federal, not state, law.” In re Marriage of Lytle, 105 Ill.App.3d 1095 (1982).
11 U.S.C. § 101(14A) defines a domestic support obligation as a debt (1) owed to or
recoverable by a spouse, former spouse or child; (2) that is in the nature of alimony,
maintenance, or support; (3) that is established by a court order; and (4) that has not
been assigned to a governmental entity. State law is used to ascertain the incidents
or nature of the debt to determine whether it fits within the federal exception.
Marriage of Lytle. The label attached and the language of the decree or underlying agreement are not
controlling in determining dischargeability; rather, one must look to the substance of the decree or
agreement to determine the essential nature of the obligation. Marriage of Lytle.

Thus, courts have held that attorney’s fees owed to a former spouse, or the former spouse’s attorney,
in conjunction with or awarded in the context of a support obligation have met the definition of “domestic
support obligation”. See Johnson, discussed above; In re Papi, 427 B.R. 457 (Bankr. N.D.
Ill. 2010).

Whereas in Chapter 13 debts under § 523(a)(15) are potentially dischargeable, in
Chapter 7 debts arising in the course of a divorce or separation are unqualifiedly non-
dischargeable. In re Harn, 2008 WL 130914 (Bankr. C.D. Ill. 2008). (However, note that §
523(a)(15) was markedly changed by BAPCPA; previously, courts applied a balancing
approach to determine whether the debtor could reasonably afford to pay such debts and
the resulting harm posed to the creditor spouse in the event of a discharge, and this
approach no longer applies.)

Serious Consideration Required: An individual and his or her attorney involved in settlement
of a dissolution action should clearly set forth the intent of the parties and insure that it meets the federal
definition for the type of obligation the agreement is attempting to achieve. Furthermore, the parties
should be made aware that particular obligations set forth in the agreement may
ultimately be non-dischargeable in a bankruptcy proceeding. Hold-harmless
agreements have been held nondischargeable in Chapter 7 proceedings per §
523(a)(15), as have agreements to pay mortgage obligations. See In re Walden,
312 B.R. 187 (Bankr. C.D. Ill. 2004).

For debtors with significant marital debt, consideration must be given to the
benefit afforded in a Chapter 13 case, when selecting under which chapter to file.
In McCreary, discussed above, the bankruptcy court held that a former husband’s
filing of a Chapter 13 bankruptcy instead of a Chapter 7 to avoid, among other things, paying the full
amount due his former wife under a property settlement was legitimate and not in bad faith.

John\Sharp Thinking\#72.doc
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